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IBIMA Business Review

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Vol. 2011 (2011), Article ID 913652, 22pages

DOI: 10.5171/2011.913652

Copyright ©2011 Wong Shun Mun Helen and Wong Kin Ho. This is an open access article distributed

under the Creative Commons Attribution License unported 3.0, which permits unrestricted use,

distribution, and reproduction in any medium, provided that original work is properly cited. Contact

author: Wong Shun Mun Helene-mail: [email protected]

Building Relationship between Education

Institutions and Students: Student Loyalty in

Self-Financed Tertiary Education

Wong Shun Mun Helen1 and Wong Kin Ho

2

1 Hong Kong Community College, Hong Kong Polytechnic University, Yau Ma Tei, Hong Kong

2 School of Accountancy, the Chinese University of Hong Kong, Shatin, Hong Kong

_________________________________________________________________________

Abstract

This study attempts to test the applicability of relationship marketing concepts within the

self-financed tertiary education (SFTE) industry. Building on the well-established relationship

marketing concepts, a conceptual model is proposed in this study to investigate the casual

relationship between relationship commitment and student loyalty, and the key determinants

of relationship commitment (relationship benefits, relationship termination costs, shared

values, and trust). To achieve the above objectives, an in-depth study was conducted in a

leading SFTE institution in Hong Kong. Structured questionnaires were used to collect data.

Structural equation modeling approach was used to evaluate the explanatory power and casual

links of the modelThe results indicate that relationship commitment is a strong driver of

student loyalty. Second, relationship benefits, relationship termination costs, and shared values

are found to have positive influence on relationship commitment. Among these three

determinants, the construct of relationship benefits is found to be the most important factor

affecting relationship commitment. Third, trust is found to have no significant impact on

relationship commitment in SFTE environment. The research findings provide new and useful

insights to the management of SFTE in building relationship with students and resources

allocation. The study discusses the implications of these findings and suggests areas for future

research.

Keywords: relationship marketing, student loyalty, relationship commitment, self-financed

tertiary education

_____________________________________________________________________________________________________________

Introduction

Relationship marketing has become a core

issue for business in the last few decades

because there is a continuing growth of

service industries in the economy

(Lehitnen, 1996), and customer buying

patterns are changing rapidly (Buttle,

1999). Building relationship with

customers is crucial for business to sustain

competitive advantages (Wong and Sohal,

2002). The application of marketing

concepts in education setting is rather low,

and research from the relationship

perspective in education setting is also

minimal (Hennig-Thurau et al., 2001).

Therefore, there is a need to have research

in education setting from the relationship

perspective.

Self-financed or private tertiary education

has been growing rapidly in the past few

years in different parts of the world. In the

past, students did not need to pay tuition

fees or paid very low tuition fees for

tertiary education. In the most recent


2

decades, students have had to pay higher

tuition fees. There has been considerable

growth in the number of private

universities and there are more

self-financed programmes in the tertiary

education now than ever before. Tertiary

education institutions are receiving little or

no government funding. A study on student

loyalty using relationship perspective is

important to self-financed tertiary

education (SFTE) industry.

In relationship marketing, a higher level of

relationship commitment will lead to

higher intention of the parties remaining in

a relationship (Gronroos, 1990; Morgan

and Hunt, 1994). This present study

borrows the concept from marketing

literature, and investigates whether

relationship commitment has a positive

influence on student loyalty, and some of

the determinants (relationship benefits,

relationship termination costs, shared

values, and trust) influencing relationship

commitment in the SFTE context.

This study attempts to test the applicability

of marketing concepts within the SFTE

industry. The main objectives of this study

are twofold. Firstly, this study examines the

main direct effect of relationship

commitment on student loyalty. Secondly,

this study also examines the determinants

influencing relationship commitment in

education context. This empirical study is

conducted within the SFTE context in Hong

Kong.

Literature Review

Relationship marketing is gaining

recognition over the past few decades. The

focus has switched from transactional

exchange to relationship exchange

(Gronroos, 1994).

Relationship marketing is defined as

“attracting, maintaining and in

multi-service organizations – enhancing

customer relationships” (Berry, 1983).

Gronroos (1990) described relationship

marketing as “to establish, maintain and

enhance relationship with customers and

other partners” and this is achieved by

“mutual exchange and fulfillment of

promises”.

Morgan and Hunt (1994) extended the

definition to include all forms of relational

exchange, such as supplier, lateral, buyer

and internal, and suggested “establishing,

developing and maintaining successful

relational exchanges” is relationship

marketing. Having good relationship with

customers can enhance competitive edge

and profits of the company from higher

customer loyalty and lower costs in

attracting new customers (Berry, 1995).

The key objective of relationship marketing

is to maintain customer loyalty (Hart and

Johnson, 1999).

A loyal customer stays in a relationship will

do repeat purchase, say positive

word-of-mouth, and therefore generate

more financial profits to the company

(Buttle, 1996; Hart and Johnson, 1999).

Education is people-based. Students are

customers of education institutions (Finney

and Finney, 2010). A few studies in

education field have used Morgan and

Hunt’s (1994) model to discuss the

relationship between students and their

education institutions (Adidam et al., 2004;

Holdford and White, 1997; Hennig-Thurau

et al., 2001). Building relationship with

students is important to enhance student

loyalty. A loyal student provides

predictable financial resources for tertiary

education institutions, especially the

self-financed type. This study examines

student loyalty using relationship

perspective in the context of SFTE.

Student Loyalty

Loyalty is “a deeply held commitment to

rebuy or repatronize a preferred

product/service consistently in the future”

(Oliver, 1999). Early research on customer

loyalty has been focused on consumer

goods (Gremler and Brown, 1996), with

emphasis on behavioral approach (de

Ruyter et al., 1998). Behavioral approach

refers to repeat purchasing behaviors

(Gremler and Brown, 1996; Dick and Basu,

IBIMA business review

3

1994). However, the behavioral approach

may not give a comprehensive picture of

loyalty. With the expansion of service

industry in the past few decades, the

behavioral approach should be

supplemented with the attitudinal

approach to reflect relative attitudes

towards the product or services (Dick and

Basu, 1994). Attitudinal approach is

defined as a liking or attitude towards the

provider based on satisfactory experience

with products or services (Oliver, 1999);

customers are more willing to recommend

the provider to another customer (Gremler

and Brown, 1996). In the empirical study of

Zeithaml et al. (1996), loyalty is found to

comprise word-of-mouth and repurchase

intention. Repurchase intention implies

doing more business with the company in

future and considering the company to be

the first choice. Word-of-mouth is to say

positive things about the company and

recommend the company to others.

There is growing interest in studying

student loyalty, and student loyalty has

become an important concern for tertiary

education (Hennig-Thurau et al., 2001;

Marzo-Navarro et al., 2005). Some studies

on student loyalty (such as Helgesen and

Nesset, 2007; Nguyen and LeBlanc, 2001;

and Rowley, 2003) have adopted the two

aspects of loyalty identified by Zeithaml et

al. (1996), that is repurchase intention and

word-of-mouth.This study adopts the

repurchase intention aspect as student

loyalty because this study aims to find out

whether the existing associate degree and

higher diploma students of SFTE

institutions would continue to pursue

bachelor degree courses at their current

institutions in future.

According to Reichheld (1996), an existing

customer cannot be replaced by a new

customer, and it is expensive to attract a

new customer. On average, a company

spends two to twenty-five times as much

on attracting a new customer relative to

retaining an existing customer (Nauman

and Giel, 1995). Customer loyalty is crucial

to keep cost low. In education, retaining

students can provide solid financial

support to the education institution; a loyal

student may recommend his/her education

institution to friends, and may also

continue to support the education

institution via donations, financial support

or offering placements to existing students

after graduation (Hennig-Thurau et al.,

2001).Since student loyalty is important, it

is worthwhile to examine a key

determinant of student loyalty, the

relationship commitment, in the next

section. Relationship commitment

stabilizes behaviors over time, irrespective

of the circumstances (Scholl, 1981), and

this is a key component of long-term

loyalty (Morgan and Hunt, 1994). Some

recent studies emphasize the importance of

relationship commitment to enhance

student loyalty because education is a

service and relationship commitment in

service industry helps build relationships

which, in turn, enhances loyalty.

Relationship commitment is found to be a

key factor affecting students’ cooperation

and propensity to leave in western

government-funded tertiary education

context (Adidam et al., 2004; and Holdford

and White, 1997).

Relationship Commitment

In organizational behavior literature,

commitment comprises affective

(emotional) and cognitive (calculative)

aspects (Allen and Meyer, 1990; O’Reilly

and Chatman, 1986).

Many marketing scholars borrow the

concept of organizational commitment to

understand the nature of customer

commitment (Fullerton, 2003; Gruen et al.,

2000). Affective commitment is customers’

emotional bonding and sense of belonging

to the company and customers’ attachment

to the company (Fullerton, 2005; Mattila,

2004; Gruen et al., 2000).

Cognitive commitment arises from a

cognitive evaluation of gains and losses,

and benefits and costs of a continued

relationship with the company (Geyskens

et al., 1996). Cognitive commitment is the

extent of the need to maintain a


4

relationship due to significant perceived

termination or switching costs (Venetis and

Ghauri, 2004).

In service marketing literature,

“relationships are built on the foundation

of mutual commitment” (Berry and

Parasuraman, 1991). In relationship

marketing literature, relationship

commitment is described as “an enduring

desire to maintain a valued relationship”

(Moorman et al., 1992). Relationship

commitment is considered as a central

construct in relationship marketing

literature (Morgan and Hunt, 1994), and is

defined as “an exchange partner believing

that an ongoing relationship with another

is so important as to warrant maximum

efforts at maintaining it; that is, the

committed party believes the relationship

is worth working on to ensure that it

endures indefinitely” (Morgan and Hunt,

1994). Relationship commitment entails a

desire to develop a stable relationship and

confidence in the stability of the

relationship (Anderson and Weitz, 1992).

This study adopts Moorman et al.’s (1992)

concept of relationship commitment as an

enduring desire to maintain a valued

relationship, and examines relationship

benefits, relationship termination costs,

shared values and trust as the four key

factors affecting relationship commitment

because these four factors have been found

to have impact on relationship

commitment in the context of western

government-funded tertiary education

(Adidam et al., 2004; Holdford and White,

1997). The following sections examine

these four factors in details.

Relationship Benefits

The ability to provide superior benefits and

value to customers is a prerequisite when

establishing relationship with customers

(Ravald and Gronroos, 1996). Morgan and

Hunt (1994) examined the relationship

between automobile tire retailers and

suppliers, a business to business

relationship, and said relationship benefits

obtained by retailers include product

profitability, customer satisfaction, and

product performance. Relationship benefits

refer to the quality of services and goods

relative to other suppliers. Relationship

benefits are the superior benefits provided

to customers, and these superior benefits

are highly valued by customers.

The benefits customers receive from a

relationship are risk-reducing benefits and

social beneKits (Berry, 1995). Bitner (1995)

conceptualized relationship benefits in four

aspects: reducing stress, simplifying one’s

life, enjoying social support system, and

precluding the need to change. Benefits

addressed by Berry (1995) and Bitner

(1995) can be generalized into two types:

functional benefits and social benefits

(Beatty et al., 1996). In a recent study of

relationship benefits in the retail banking

industry of Greece, Dimitriadis (2010)

suggested that the five types of benefits

are: competence, benevolence, special

treatment, social and convenience.

Relationship benefits generate positive

impact on relationship outcomes, such as,

continuation of a relationship (Gwinner et

al., 1998; Patterson and Smith, 2001), site

commitment (Park and Kim, 2003),

commitment to the service business

(Hennig-Thurau et al., 2002), commitment

in online retailing context (Mukherjee and

Nath, 2007), and satisfaction in retail

banking (Dimitriadis, 2010; Molina et al.,

2007).

In education context, Adidam et al. (2004),

and Holdford and White (1997) suggested

that students will continue their

relationship with their school if the school

offers superior benefits in terms of

education quality, location, cost of tuition,

internship opportunities, better

placements and networking opportunities.

The higher the relationship benefits

obtained by the students, the higher will be

the relationship commitment of students to

their education institution. This study

follows Morgan and Hunt’s (1994)

conceptualization of relationship benefits,

which has been used by Adidam et al.

(2004) and Holdford and White (1997).


5

Relationship Termination Costs

“Termination costs are all expected losses

from termination and result from the

perceived lack of comparable potential

alternative partners, relationship

dissolution expenses, and/or substantial

switching costs” (Morgan and Hunt, 1994).

Switching costs are defined as the costs of

switching from one supplier to another

(Burnham et al., 2003; Wathne et al., 2001).

Besides, switching costs are conceptualized

as customers’ perceptions of the magnitude

of additional costs required to terminate

the current relationship and secure an

alternative (Porter, 1980; Jackson, 1985).

“Expected termination costs lead to an

ongoing relationship being viewed as

important, thus generating commitment to

relationship” (Morgan and Hunt, 1994).

Though Morgan and Hunt (1994) see

switching costs to be of an economic nature

only, switching costs may also comprise

psychological and emotional costs (Sharma

and Patterson, 2000). Switching costs mean

the costs of switching including

psychological costs, time and money (Dick

and Basu, 1994). Furthermore, the

perception of searching costs, such as time

and effort to be incurred in selecting a new

supplier is also a kind of switching cost

(Sharma and Patterson, 2000).

Burnham et al. (2003) described switching

costs from three perspectives: procedural

switching costs, financial switching costs,

and relational switching costs. White and

Yanamandram (2007) proposed switching

costs include uncertainty costs,

pre-switching costs, set-up costs,

post-switching costs, and benefit/loss

costs.

Findings of Vasudevan et al. (2006),

Burnham et al. (2003), and Patterson and

Smith (2001) suggest that relational

switching cost that involves psychological

and emotional discomfort due to breaking

of bonds and loss of identity is positively

associated with commitment. White and

Yanamandram (2007) suggested that in

business-to-business service sector,

customers are motivated to commit to

existing relationships because of the high

switching costs as described in the above

section. In education context, Adidam et al.

(2004) studied the relationship between

students and their school and defined

relationship termination costs as the

perception of net losses (financial,

emotional, or time) that may result from

dissolution of the relationship.

The perceived costs to a student include

both economic and non-economic sides of

switching costs. Therefore, it might be the

loss of friendships or loss of credits on

switching to another educational

institution. The losses cannot be made good

by the other supplier. Their findings

suggest that relationship termination costs

have a positive impact on relationship

commitment in western government-

funded tertiary education institutions. The

present study adopts conceptualization of

relationship termination costs in Porter

(1980).

Shared Values

Different studies have used different names

to describe shared values. For instance,

Levin (2004) used shared perspective to

investigate shared vision and shared

language of two parties, while Orr (1990)

and Monteverde (1995) used shared

perspective to investigate shared language

and shared narratives. Tsai and Ghoshal

(1998) used shared vision to refer to the

common goals or aspirations the

organization members share which help

members to communicate and exchange

ideas freely. According to Schein (1990),

values shared between two parties are the

underlying assumption.

Further, there is a broader interpretation of

shared values by Morgan and Hunt (1994).

Shared values are defined as “the extent to

which partners have beliefs in common

about what behaviors, goals and policies

are important or unimportant, appropriate

or inappropriate, and right or wrong”

(Morgan and Hunt, 1994).

It means two parties are having similar

perceptions about how to interact with


6

others to enhance their communications

and avoid misunderstanding. Shared values

will bring more opportunities for two

parties to exchange their ideas (Tsai and

Ghoshal, 1998). In service industry, shared

values is the extent to which a service

provider and a client have common beliefs

in what services are important or

unimportant, appropriate or inappropriate,

and right or wrong (Morgan and Hunt,

1994; Levin, 2004).

Parties that share similar values about

appropriate behaviors, goals and policies

are more likely to be committed to a

relationship (Morgan and Hunt, 1994;

Holdford and White, 1997; Adidam et al.

2004). In education, Holdford and White

(1997) found that students who shared the

same goals, ideals and codes of conduct

with their school were more likely to

commit to a relationship with the school.

Adidam et al. (2004) found that the more

the staff and students have similar

concerns and ideas on important issues,

such as work-load, learning behavior and

assessments, the more the students will be

committed to the relationship. Both studies

suggest that the construct of shared values

is one of the factors affecting relationship

commitment in western

government-funded tertiary education.

This study adopts the conceptualization of

shared values in Morgan and Hunt (1994).

Trust

Trust has been defined in classical studies

of psychology, sociology and economics, as

relying on one’s word, promise, oral or

written statement (Rotter, 1967), expecting

the occurrence of an event (Deutsch, 1958),

and making beneficial decisions (Gambetta,

1988).

The definition of trust has evolved over

time and numerous interpretations have

been found in marketing literature. Many

researchers consider trust a kind of belief

or conKidence (Crosby et al., 1990;

Moorman et al., 1992; Morgan and Hunt,

1994). Besides, trust is related to

benevolence, which refers to the service

provider’s motives and intentions toward

the client (Crosby et al., 1990; Doney and

Cannon, 1997).

Reliability is a word usually used in the

definition of trust (Schurr and Ozanne,

1985; Crosby et al., 1990; Moorman et al.,

1992; Morgan and Hunt, 1994). Reliability

refers to one’s promise (Schurr and

Ozanne, 1985), and it is also about being

consistently good in performance

(Moorman et al., 1992; Morgan and Hunt,

1994).Morgan and Hunt (1994) use

reliability and integrity together to define

and conceptualize trust, and define trust as

“when one party has confidence in an

exchange partner’s reliability and

integrity.” A trustworthy party is one that is

considered reliable and having high level of

integrity and associating qualities of

competence, consistence, fairness, honesty,

responsibility, helpfulness and

benevolence.

Trust enhances commitment to a

relationship by reducing transaction costs

in an exchange relationship, reducing risk

perceptions associated with the partner,

and increasing confidence that short term

inequities can be resolved in the long run.

Trust has been found to be a factor

affecting commitment in many previous

studies (Morgan and Hunt, 1994;

Gannesan, 1994; Moorman, Zaltman and

Desphande, 1992; Kassim and Abdulla,

2006; Liang and Wang, 2007).

A few studies have adopted the Morgan and

Hunt (1994) model to study the

relationship between students and

education institutions, such as

Hennig-Thurau et al. (2001), Holdford and

White (1997), and Adidam et al. (2004).

These studies conceptualize trust as

confidence in an exchange partner’s

reliability and integrity.

They are based on personal experiences

individual students have had with their

education institutions. The findings in

these studies suggest that trust is one of the


in government-funded tertiary education.

This study follows the abovementioned

studies in education, and conceptualizes


7

trust as the one used by Morgan and Hunt

(1994).

Relationship between Shared Values and

Trust

Morgan and Hunt (1994) suggested that

the construct of shared values is an

antecedent to relationship commitment, as

well as trust. Perceptions of similar values

between partners increase the perceived

ability of partners to predict the other’s

behavior and motives, and therefore

increase trust. Higher shared values

between partners lead to a higher level of

trust. Similar values on what are the right

things to do and what are the things worth

doing influence one’s choices and actions

(Conner and Backer, 1975), and shared

values are taken as an antecedent of trust

development. Shared values are the key

antecedent of trust in online retailing

context (Mukherjee and Nath, 2007).

In the government-funded tertiary

education context, Adidam et al. (2004) and

Holdford and White (1997) also suggested

that the construct of shared values is

positively associated with trust. When

teachers and students are having similar

values such as a strong work ethic,

students are more likely to attribute

challenging examination questions and

assignments to the work ethic rather than

less desirable attributions.

Having reviewed the concepts of student

loyalty, relationship commitment,

relationship benefits, relationship

termination costs, shared values and trust,

the next section examines the research

model and hypotheses.

Research Model and Hypotheses

This study proposes the following

conceptual model which links student

loyalty, relationship commitment, and four


(Figure1). The research model has two

main features. Firstly, it examines the main

direct effect of relationship commitment on

student loyalty. Secondly, it investigates the

factors (relationship benefits, relationship

termination costs, shared values, and trust)

affecting relationship commitment. This

section presents the research model and

hypotheses.

Relationship Commitment as a Driver of

Student Loyalty

Commitment is a key element of long-term

loyalty (Morgan and Hunt, 1994). It is

found to have positive impact on customer

loyalty (Verhoef et al., 2002; Fullerton,

2005). Numerous studies in business

setting have validated the

commitment-loyalty link (Macintosh and

Lockshin, 1997; Caceres and Paparoidamis,

2007; Amine, 1999; Dimitriades, 2006;

Wetzels et al., 1998). In tertiary education,

enhancing student commitment to the

education institution is a top priority of

institutions’ managements. Adidam et al.

(2004) and Holdford and White (1997)

suggested that relationship commitment

has a positive impact on cooperation

between students and the education

institution, and a negative impact on

propensity to leave the education

institution. Based on the aforesaid

literature, the first hypothesis is

formulated:

H1: Students’ relationship commitment to

the education institution has a significant

positive impact on student loyalty.

Relationship Benefits as a Driver of

Relationship Commitment

Relationship benefits have positive effects

on relationship outcomes, such as

commitment to service business

(Hennig-Thurau et al., 2002), commitment

to continue in a relationship (Gwinner et

al.,1998), and philanthropists’ commitment

to non-profit organizations (MacMillan et

al., 2005). Adidam et al. (2004) and

Holdford and White (1997) suggested that

students will continue their relationship

with their education institution if the

education institution offers superior

benefits in terms of education quality,

location, cost of tuition, internship

opportunities, better placements and

networking opportunities. The higher the


8

relationship benefits obtained by the

students, the higher the relationship

commitment of students to their education

institution will be.

Using the aforesaid literature, the second

hypothesis is formulated:

H2: Students’ perception of relationship

benefits has a significant positive impact on

relationship commitment.

Figure1. Conceptual Model of Relationship Commitment on Student Loyalty Relationship Termination Costs as a

driver of Relationship Commitment The relationship termination

costs-relationship commitment link has

been validated in numerous studies in

business setting (Porter, 1980; White and

Yanamandram, 2007; Dwyer et al., 1987;

Sharma and Patterson, 2000). Adidam et al.

(2004) deKined relationship termination

costs as the perceptions of financial,

emotional, or time losses that may result

from dissolution of the relationship. The

costs perceived by students include both

economic and non-economic sides of

switching costs; therefore, it might be the

loss of friends or loss of credits that may

have to be incurred when switching to

another education institution. Their

findings suggest that relationship

termination costs have a positive impact on

relationship commitment. Based on the

aforesaid studies, the third hypothesis is

formulated:

H3: Students’ perceptions of relationship

termination costs havea significant positive

impact on relationship commitment. Shared Values as a Driver of Relationship

Commitment The more the parties share information

and communicate, the stronger the

relationship between the parties

(Anderson and Weitz, 1989; Anderson and

Narus, 1990). Shared values are found to

have positive impact on relationship

commitment (Morgan and Hunt, 1994).

Holdford and White (1997) found that

students who shared the same goals, ideals

and codes of conduct with the education

institution were more likely to commit to a

relationship with the education institution.

Adidam et al. (2004) found that the more

the staff and students had similar ideas and

positions on important issues, such as

work-load, learning behavior and

assessments, the more committed the

students were to the relationship. Both

studies showed that the construct of shared

values is one of the determinants of


9

relationship commitment. Based on the

aforementioned literature, the fourth

hypothesis is formulated: H4: Students’ perceptions of shared values

have a significant positive impact on

relationship commitment. Trust as a driver of Relationship

Commitment Numerous studies in business setting have

validated the link between trust and

relationship commitment. Morgan and

Hunt (1994) found that trust was one of

the determinants of relationship

commitment. In a business-to-business

environment, trust is an element in

building relationship commitment between

companies (Caceres and Paparoidamis,

2007). Adidam et al. (2004) and Holdford

and White (1997) suggested that trust is

one of the determinants of relationship

commitment in government-funded

tertiary education. Using the aforesaid

studies, the fifth hypothesis is formulated:

H5: Students’ trust in the education

institution has a significant positive impact

on relationship commitment. Shared Values as a Driver of Trust Previous studies have indicated that the

more the values shared between partners,

the higher the level of trust created

between them. Morgan and Hunt (1994)

found that perceptions of similar values

shared between partners increase the trust

among partners. Adidam et al. (2004) and

Holdford and White (1997) suggested that

the construct of shared values is positively

associated with trust in

government-funded tertiary education.

Based on the aforesaid studies, the sixth

hypothesis is formulated: H6: Students’ perceptions of shared values

have a significant positive impact on trust. Research Design and Method This study has a confirmatory approach

because the hypotheses in this study are

developed on the basis of theories found in

previous studies in business settings and

government-funded education institutions.

The aim of this study is to investigate

whether the marketing concepts are

supported in SFTE institutions by empirical

data. This study uses the questionnaire

survey method to collect primary data from

students. Respondents of pilot test also

indicated that students were comfortable

with filling in the questionnaires. This

section discusses sampling and data

collection, and measurements of

constructs. Sampling and Data Collection The present study aims to investigate the

relationship between relationship

commitment and student loyalty and


in SFTE institutions. The researcher wants

to find out whether the current

self-financed associate degree and higher

diploma students will continue their

bachelor degree studies at their current

tertiary education institutions. For the

purpose of this study, a SFTE institution

was identified from the list of tertiary

education institutions available on the

website of Education Bureau of the HKSAR

Government (http://www.edb.gov.hk/).

Enrolment of students in this institution

accounted for 11.5% (2008/09) of the total

number of self-financed associate degree

and higher diploma students in all the 21

institutions in Hong Kong. This institution

was approached and it agreed to allow the

researcher to administer the questionnaire

survey to associated degree and higher

diploma students at the campus.

Convenience sampling technique was used

to approach the students because students

are the direct customers of education. Trained student helpers distributed the

questionnaire together with a covering

message explaining the purpose of the

study to students in the identified SFTE

institution. A personally administered

questionnaire allows student helpers to

introduce the survey, provide clarifications

on the spot to respondents, and collect the

completed questionnaire immediately; it is

also less expensive and less

time-consuming than interviews because

the questionnaires can be distributed to a

large number of individuals simultaneously

(Cavana et al., 2001).


10

Participation in the survey was voluntary.

The mass survey was conducted in April

2010. 480 questionnaires were distributed.

After discarding all invalid questionnaires,

444 valid questionnaires were collected.

SPSS 13.0 was used to examine the

descriptive frequencies. 60.4% of the

respondents were female. 98.2% of the

respondents were in the age range of 18 to

25. 40.1% of the respondents were

associate degree students and 59.9% were

higher diploma students. Almost half of

the respondents were studying business

courses. 49.3% of the respondents were

from the business division, 23.9% were

from science and technology division, and

26.8% were from communication and

social science division. Measurements of Constructs The measures of student loyalty,

relationship commitment, relationship


shared values and trust relied on existing

validated scales in previous research.

Table 1 provides the details of these

measurements. The 7-point Likert-type

scales were anchored by 1 (strongly

disagree) and 7 (strongly agree) for all 22

items. Student loyalty was measured with three

items adopted from a previous study in

education context (Nguyen and LeBlanc,

2001). Relationship commitment was

measured with three items, and trust was

measured with four items, adopted from

Holdford and White (1997), a previous

study in education context. Four items of

relationship benefits and three items of

shared values were adopted from previous

studies in education context (Adidam et al.,

2004; and Holdford and White, 1997). This study considers both economic and

non-economic sides of relationship

termination costs, and 5 items were

adopted from Sharma and Patterson

(2000). Some wordings are modiKied to

Kit the education context. Table 2

provides correlation matrix of the

constructs.

Analysis and Results This study employed two steps to assess

the measurement and structural model. Measurement Model Testing and Results The confirmatory factor analysis (CFA)

reveals that the chi-square for the overall

model is 648.15 (df = 194, p-value = 0.00).

Other fit indices, including the comparative

Kit index (CFI = 0.968), normed Kit index

(NFI = 0.955), relative Kit index (RFI =

0.946), incremental Kit index (IFI = 0.968),

and root mean square error of

approximation (RMSEA = 0.075), are

satisfactory because they are better than

recommended values. Therefore, the

proposed model provides a reasonable

explanation of the observed covariance

among the six constructs. Reliability and validity were assessed to

ensure the information is trustworthy.

The reliability coefficients of the six

constructs range from 0.785 to 0.877

(Table 1). These statistics show that the

measuring instruments used in this study

have high reliability (internal consistency)

coefficients for the sample of respondents.

The satisfactory alpha estimates obtained

from the reliability test (Table 1) also

demonstrate good convergent validity.

Further, the significantly high and

moderate loadings of indicators in the

measurement model also provide sufficient

evidence of convergent validity of the

constructs, as shown in Table 1 (Anderson

& Gerbing, 1998; Dabholker, Thorpe &

Rentz, 1996; Patterson et al., 1997). In

addition, the moderate to high correlations

between constructs (Table 2) also suggest

that the measures of the model display a

certain degree of convergent validity.

(Cronin & Taylor, 1992; Quester &

Romaniuk, 1997). Calculations of the covariance matrix

produced values ranging from 0.229 to

0.819 for each pair of construct, which are

lower than the recommended level of 1.0

(Dabholkar et al., 1996; Koerner, 2000)

(Table 3). Therefore, the result suggests

that the constructs are statistically distinct

within the CFA model, and provides

evidence of discriminant validity.


11

Table 1 Construct Measures and Confirmatory Factor Analysis Results

Construct and Scale Item Factor

Loading

CR AVE Cronbach’s

alpha

Relationship Benefits (RB) 0.804 0.625 0.785

RB1 My college provides several beneficial

opportunities for the students, such as

exchange programmes, company visits,

placements, and professional seminars.

RB2 The location of my college makes this the ideal

college to attend.

RB3 The money spent for study in my college is

worth it because I can get a bachelor degree

offer or I can get a job offer after I finish my

study here.

RB4 Overall, my college provides a high quality

education.

Relationship Termination Costs (RTC)

RTC1 On the whole, it would cost me a lot of time

and energy to find another college to study.

RTC2 I would lose a lot of things if I transfer to

another college, such as loss of friendship, and loss of

credits.

RTC3 It is risky to change to a new college because

the new college may not give what I want.

RTC4 I would feel frustrated if I terminate my study

at my college.

RTC5 Considering everything, the costs to terminate

my study at my college and start my study at a

new college would be high.

Shared Values (SV)

SV1 My college and I have similar views regarding

appropriate behavior in the classroom.

0.671

0.511

0.805

0.835

0.863 0.643 0.858

0.595

0.783

0.844

0.753

0.745

0.859 0.777 0.855

0.784


12

Note: All estimates were signiKicant (p<0.001), CR = composite reliability, AVE = average

variance extracted

SV2 My college and I have similar views regarding

reward structures for good performance in my study.

SV3 My college and I think alike.

0.852

0.817

Trust (TR) 0.873 0.722 0.871

TR1 My college and lecturers make I feel that my

well-being is important.

TR2 My lecturers have high integrity.

TR3 I trust my lecturers completely.

TR4 My lecturers are always acting in my best

interests.

0.749

0.832

0.824

0.773

Relationship Commitment (RC) 0.880 0.805 0.877

RC1 I feel a strong bond to my college.

RC2 I intend to maintain a relationship with my

college after I graduate.

RC3 My college deserves the commitment of its

students.

0.829

0.855

0.842

Student Loyalty (SL) 0.857 0.760 0.834

SL1 I would attend degree courses at my college if it

offers degree courses in future.

SL2 I would attend the advanced courses at my

college if it offers them in the coming years.

SL3 If I had to apply for associate degree or higher

diploma courses now, my college would be my first

choice.

0.590

0.918

0.911


13

Table 2 Correlation Matrix of Constructs

RB RTC SV TR RC SL

RB 1.000

RTC 0.458 1.000

SV 0.314 0.475 1.000

TR 0.119 0.398 0.670 1.000

RC 0.735 0.655 0.432 0.248 1.000

SL 0.682 0.564 0.390 0.252 0.769 1.000

Note: All correlations were signiKicant (p<0.05)

Table 3 Covariance Matrixes of the Six Constructs

RB RTC SV TR RC

RTC Estimate 0.458

S.E. 0.046

Estimate + S.E.*2 0.550

SV Estimate 0.314 0.475

S.E. 0.051 0.044

Estimate + S.E.*2 0.416 0.563

TR Estimate 0.119 0.398 0.670

S.E. 0.055 0.047 0.034

Estimate + S.E.*2 0.229 0.492 0.738

RC Estimate 0.735 0.655 0.432 0.248

S.E. 0.030 0.034 0.046 0.051

Estimate + S.E.*2 0.795 0.723 0.524 0.350

SL Estimate 0.682 0.564 0.390 0.252 0.769

S.E. 0.033 0.038 0.046 0.050 0.025

Estimate + S.E.*2 0.748 0.640 0.482 0.352 0.819

Another test for discriminant validity is

average variance extraction (AVE)

(Dabholkar et al., 1996). The results of

AVE calculated for the CFA model are

presented in Table 1. All values of AVE

range from 0.625 to 0.805, exceeding the

recommended level of 0.5 (Hair et al.,

1998). In conclusion, the results conKirm

the discriminant validity of the constructs

in CFA model. Therefore, the measurement

model meets all psychometric property

requirements.

Overall Structural Model: Path Analysis

and Hypothesis Testing Using LISREL 8.8, Structural Equation

Model (SEM) was used to analyze the

structural model (Figure 1). Except for

the low p-value and relatively high

Chi-square/df ratio (p-value = 0.00, df =

200, Chi-square/df = 3.4), most of goodness

of fit indices, including NFI, RFI, IFI and CFI,

range from 0.945 to 0.966. All are well

above the recommended level of 0.90.In

addition, RMSEA of the proposed model is

0.076, which is below the minimum


14

requirement of 0.10 and within the fair fit

range of 0.05 to 0.08. These goodness of Kit

indices indicate that the structural model

represents the data structure well.

R2 values, path coefficients, and their

statistical significance for fitted

hypothesized model, and the results of

direct, indirect, and total effects of the

model are shown in Table 4. R2 values of

the constructs are high, ranging from 0.459

to 0.717 (trust, student loyalty, and

relationship commitment), which provide

adequate evidence of the predictive ability

of the model. Each hypothesis was tested

by examining path coefficient. All

structural paths except hypothesis H5 are

signiKicant at the 0.05 level, which suggests

that Trust (TR) shows insignificant direct

effect on Relationship Commitment (RC),

and, therefore, hypothesis H5 should be

rejected in the subsequent analysis. In

contrast, Relationship Benefits (RB), and

Relationship Termination Costs (RTC)

show strong influence on Relationship

Commitment (RC), as indicated by high to

moderate standardized coefficients 0.563

and 0.371, respectively. Hypotheses H2 and

H3 are supported by empirical evidence.

Shared Values (SV) has a small direct effect

(standardized coefKicient 0.116) on

Relationship Commitment (RC), and an

indirect effect through Trust (TR), which

gives a total effect of 0.090. Hypothesis H4

is supported. In addition, the high

standardized coefKicient of 0.677 indicates

that Shared Values (SV) has a significant

and strong influence on Trust (TR).

Hypothesis H6 is supported. Finally, the

high standardized coefKicient of 0.796

indicates that Relationship Commitment

(RC) has a significant and strong influence

on the ultimate endogenous variable

Student Loyalty (SL). Hypothesis H1 is

supported. It can therefore be concluded

that hypotheses H1, H2, H3, H4 and H6 are

strongly supported with empirical evidence

in the proposed model.

Table 4 Testing of the Hypotheses

Hypothesis Construct Relationship

Standard Path Coefficient t-value

Indirect Effect

Total Effect

Hypothesis Supported

H1 RC�SL 0.796*** 11.574 -- 0.796 Yes

H2 RB�RC 0.563*** 10.291 -- 0.563 Yes

H3 RTC�RC 0.371** 6.939 -- 0.371 Yes

H4 SV�RC 0.116* 1.960 -0.026 0.090 Yes

H5 TR�RC -0.038 -0.722 -- -0.038 No

H6 SV�TR 0.677*** 11.574 -- 0.677 Yes

TR RC SL

R2 0.459 0.717 0.634

* indicates signiKicant at p<.05 level; ** indicates signiKicant at p<.01 level; *** indicates signiKicant at p<.001 level.


15

Discussion

Having good relationship with customers

will enhance competitive edge and increase

financial benefits of the company from

higher customer loyalty and lower costs of

attracting customers (Berry, 1995). Extant

research from the relationship perspective

in education setting is minimal

(Hennig-Thurau et al., 2001). Therefore,

this study is one of the earliest attempts to

test relationship marketing concepts in

education context.

Self-financed or private tertiary education

has been growing rapidly in the recent past

all over the world. Students have to pay

high tuition fees for tertiary education. The

operation of self-financed education

institutions is similar to running a business

company, and the students are considered

as customers. Managements of SFTE

institutions have to focus on enhancing

student loyalty in order to get sufficient

revenue for running the institutions.

Relationship commitment is found to be

positively associated with loyalty in

business environment in previous studies,

such as Caceres and Paparoidamis (2007),

Amine (1999), and Morgan and Hunt

(1994). In the limited previous research in

education environment, relationship

commitment is found to be a key factor

affecting students’ cooperation and

propensity to leave (Adidam et al., 2004;

Holdford and White, 1997). This study,

therefore, has investigated the association

between relationship commitment and

student loyalty in SFTE.

As relationship commitment is found to be

important in enhancing loyalty, a better

understanding of factors affecting

relationship commitment is also crucial.

Based on literature review, relationship


shared values, and trust were chosen as the

determinants of relationship commitment.

A hypothesized model investigating the

association between relationship

commitment and student loyalty, and

determinants of relationship commitment,

is proposed in this study.

The overall structural model is supported

by empirical data. Most of the hypothesized

relationships are supported; only one

hypothesis is not supported (Table 4).

Based on SEM analysis of the proposed

model (Figure 1), the results of this study

support the main direct effect of

relationship commitment on student

loyalty, and support the direct effects of

relationship benefits, relationship

termination costs, and shared values on

relationship commitment. The results also

support that shared values have influence

on trust.

However, unlike the common finding in

most relationship marketing literature that

trust is a determinant of relationship

commitment, the direct effect of trust on

relationship commitment is found to be

insignificant. This result provides a new

insight into the relationship marketing area

in SFTE context and to the managements of

self-financed educational institutions. The

primary objective of the sub-degree

students is to further their studies in

degree courses. Having trust in the

education institution does not mean that

the students can have a higher chance of

getting degrees and, therefore, trust is

found to have no relationship with

relationship commitment in SFTE.

Relationship building helps education

institutions gain competitive advantages.

This empirical research provides

meaningful and useful contributions to

theoretical development of relationship

marketing concepts in education context

and education management.

Managerial Implications

The findings of this study contribute useful

managerial insights for education


16

providers in the SFTE industry. This study

shows that relationship commitment has a

substantive and positive effect on student

loyalty in the SFTE industry. Education

providers have to focus on enhancing

relationship commitment in order to

increase student loyalty.

With the findings of this study, education

providers can gain a better understanding

of determinants affecting relationship

commitment, and thus can plan accordingly

to nurture them. Relationship benefits,

relationship termination costs, and shared

values all positively influence relationship

commitment in SFTE, while trust does not.

The primary intention of self-financed

students is to get degrees, and having trust

in education institution does not mean they

can get degrees.

Education providers can use the results of

the path analysis to understand the

preferences of self-financed students

(customers) and allocate resources to

enhance the determinants affecting the

students’ relationship commitment which

will increase the students’ loyalty. This will

also ensure effective use of education

institutions’ resources and focus.

The construct of relationship benefits is the

most influential determinant of

relationship commitment in the SFTE

industry. Relationship benefits include

education quality, placements, networking

options, internship opportunities,

professional seminars and talks, company

visits, location of the institution, and cost of

tuition, etc. (Adidam et al., 2004).

Education providers have to promote and

improve these perceived relationship

benefits on a continuous basis in order to

raise the relationship commitment of

students.

The construct of relationship termination

costs is the next influential determinant.

This provides signals to education

providers that students’ perceived costs,

both economic and non-economic, are the

important consideration in building

relationship commitment with the

education institution. Education providers

have to increase students’ relationship

termination costs in order to raise their

relationship commitment with the

education institution.

The construct of shared values is also a

determinant of relationship commitment in

the SFTE industry. The more the staff and

students have similar values on education

issues, such as learning behavior,

assessments, and work-load, the more the

students will be committed to the

relationship with the educational

institution (Adidam et al., 2004).

Trust is not a determinant of relationship

commitment in the SFTE industry.

Therefore, education providers should

increase focus on, and allocate more

resources to other important factors

(relationship benefits, relationship

termination costs, and shared values) in

order to raise the students’ relationship

commitment with education institution.

Limitations and Future Research

The study results have various limitations

which indicate several potential areas for

future research works. Firstly, the sample

was drawn from only one identified SFTE

institution. To enhance generalizability of

findings, the study can be extended to other

SFTE providers. Besides, the study can also

be conducted in other countries and other

environments.

• Secondly, future research can consider

conducting a longitudinal study to trace

the changing preferences and behaviors

of students (customers). The use of

multiple time frames allows researchers

to track behavioral intentions of students

(customers) over time.


17

• Thirdly, future research can consider

studying other potential outcomes of

relationship commitment. Repurchase

intention aspect of loyalty is just one

outcome. Other potential outcomes can

include students’ willingness to

recommend their education institutions

to others, and propensity to leave the

education institution, and co-operation

with lecturers.

• Fourthly, the direct effects of relationship


and shared values on student loyalty, the

mediating role of effect of relationship

commitment on student loyalty, and

applicability of the KMV model of Morgan

and Hunt (1994) in SFTE environment

have not been covered in this study.

Future research can consider studying

these areas.

• Finally, the present study has

investigated the effect of relationship

commitment on student loyalty, and the

determinants of relationship

commitment. There are some

unexplained portions which have not

been considered in this study. Future

research can consider adding other

factors affecting student loyalty, such as,

image, brand, reputation, and

satisfaction; and adding other factors

affecting relationship commitment, such

as service quality, and dependence.

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